WarnerMedia signed up 3mn subscribers to its HBO and HBO Max streaming service in the first quarter of the year, in contrast to Netflix’s bruising quarter as the two companies fight to attract new viewers.
At the end of March, WarnerMedia had 76.8mn HBO Max and HBO subscribers worldwide. The company added 1.8mn subscribers in the US, where Netflix’s growth has ground to a halt.
WarnerMedia has added 4.4mn subscribers in the US in the past year, reaching 48.6mn subscribers. By comparison Netflix has about 74.6mn subscribers in the US and Canada.
The strong results come days after Netflix revealed its decade-long run of subscriber growth had come to an end in the first quarter of the year and admitted it was becoming “harder to grow membership” in many markets. Its shares fell almost 40 per cent on Wednesday, shaving nearly $60bn from its market value.
After years of dismissing his competition — as HBO, Apple and Disney unveiled new streaming services — Reed Hastings, Netflix’s co-founder, this week admitted to investors that his new competitors have “some very good shows and films out”.
“We’re really proud of the quarter, of what we’ve done to reposition both businesses,” Pascal Desroches, AT&T’s chief financial officer, told the Financial Times, referring to subscriber adds in both its core telecoms business and WarnerMedia. “We think there are bright days ahead for both.”
Despite viewer pick-up, WarnerMedia dragged on its parent company AT&T’s performance in the first quarter, underscoring how costly the streaming business is.
Operating income from the media group fell 33 per cent from a year ago to $1.3bn, which WarnerMedia attributed to investments in HBO Max, the launch of the CNN Plus streaming service and lower advertising revenues.
The launch of CNN’s streaming service has become a point of contention internally, after WarnerMedia this month moved to new ownership under rival Discovery.
Jason Kilar, the outgoing WarnerMedia chief executive, had pushed for an ambitious plan to spend $350mn to create a streaming service for CNN, even as he knew he would be leaving the company, according to people familiar with the matter. CNN raced to launch the streaming service just a week before the $43bn merger with Discovery closed.
David Zaslav, who has taken over as chief executive of the combined Warner Bros Discovery group, has paused marketing spending to promote CNN Plus while he reviews the business, according to people familiar with the matter. Zaslav’s team is wary of investing in the niche service while it focuses on building a broader product around HBO Max.
The results will be the last that AT&T posts with WarnerMedia still part of its business, after the company sold its media assets, including Discovery, to focus on its core telecoms business. It is now playing catch-up with rivals that pulled ahead in rolling out 5G infrastructure.
Desroches said it was “so important” to separate out WarnerMedia so that the company could invest in both wings of the business in “a very significant way”.
In what is likely to support AT&T’s decision to spin off its media division, the company reported strong results in its underlying telecoms business, posting revenue of $29.7bn, an increase of 2.5 per cent from a year ago.
AT&T said it added 289,000 new fibre customers in the quarter, up 1.1mn on the same period last year, an area that the company and rival Verizon are both heavily investing in.
“We are the largest provider of fibre in the US. Where we put in fibre we win,” said Desroches.
It also benefited from the addition of 690,000 new postpaid mobile customers, its highest level of additions in a decade.
The group’s total revenues were down 13.3 per cent from the same period, partly due to the loss of income from divested businesses.
